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TMI Blog"subsidiary company" or "subsidiary"X X X X Extracts X X X X X X X X Extracts X X X X ..... s of this clause,- (a) a company shall be deemed to be a subsidiary company of the holding company even if the control referred to in sub-clause (i) or sub-clause (ii) is of another subsidiary company of the holding company; (b) the composition of a company's Board of Directors shall be deemed to be controlled by another company if that other company by exercise of some power exercisable by it at its discretion can appoint or remove all or a majority of the directors; (c) the expression company includes any body corporate ; (d) layer in relation to a holding company means its subsidiary or subsidiaries; As per Cox And Kings Ltd. Versus Sap India Pvt. Ltd. Anr. - 2023 (12) TMI 427 - SUPREME COURT (LB) Group of Companies Doctrine i. Separ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies to corporate groups. A parent company is not generally held to be liable for the actions of the subsidiary company of which it is a direct or indirect shareholder. The Companies Act, 2013, 2013 Act has statutorily recognized a subsidiary company as a separate legal entity., Balwant Rai Saluja Versus Air India ltd. - 2014 (8) TMI 1084 - Supreme Court Section 2(46) of the 2013 Act defines a holding company as a company of which one or more other companies are subsidiary companies. Section 2(87) defines subsidiary company to mean a company in which the holding company exercises control over the composition of the Board of Directors and has a controlling interest of at least 50 percent over the voting rights. Although a holding company owns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , to the extent of misusing its control, to avoid or conceal liability. In such situations, the courts apply the doctrine of alter ego or piercing the corporate veil to disregard the corporate separateness between the two companies and treat them as a single entity., Gary Born (n 44) 1545. In Life Insurance Corpn. of India Versus Escorts Ltd. - 1985 (12) TMI 289 - Supreme Cour t a Constitution Bench of this Court noted that the principle of distinct legal personality may be ignored where the associate companies are inextricably connected as to be, in reality, part of one concern. Speaking for the Bench, Justice O Chinnappa Reddy observed: 87. The application of the doctrine of lifting the corporate veil rests on the overriding consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilarly, the mere fact that the two companies have common shareholders or a common Board of Directors will not constitute a sufficient ground to conclude that they are a single economic entity. The single economic entity or the single economic unit theory imposes general enterprise liability on the corporate group. In D H N Food Distributors Ltd v. Tower Hamlets London Borough Council, [1976] 1 WLR 852 (2) , Lord Denning held that a group of three companies should be treated as a single economic entity on the basis of two factors: first, the parent company owned all the shares of the subsidiary companies to the extent that it controlled every movement of the given subsidiary companies; and second, all the three companies in the group virtual ..... X X X X Extracts X X X X X X X X Extracts X X X X
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